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Netflix Soars After Subscriber Growth Blows Away Estimates

Netflix Soars After Subscriber Growth Blows Away Estimates

After suffering a historic collapse at the end of 2021, when in the span of five…

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2 months ago

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Netflix Soars After Subscriber Growth Blows Away Estimates

After suffering a historic collapse at the end of 2021, when in the span of five months Netflix lost 75% of its value, the company has enjoyed a solid recovery over the past two year when it rose by nearly 200%, from a low of $166 to a recent 52 week high of price of $493, which in turn recovered from the 25% July to October swoon, and which was the highest price since January of 2022.

With that in mind, bulls are are hoping for continued revenue and subscriber growth following last quarter's blowout results which saw the best subscriber growth since 2020 as well as a fresh round of price increases coming at a time when NFLX had already cracked down aggressively on password sharing and was navigating a transition from focusing on subscriber growth to maximizing earnings through price hikes and an ad-supported service. It has little choice amid a torrent of competition from some of the world's biggest media companies. Here's what else to expect

  • Earnings: EPS is expected to print $2.19 a share, up from of $0.12 a share last year.
  • Revenue: Bloomberg revenue consensus is for $8.71 billion in revenue, up from $7.85 billion a year earlier.
  • Stock movement: Netflix shares typically see percentage swings ranging from the high single-digits to the mid-teens after the company posts results.
  • Q1/24 Projections: Revenue estimate 9.29$ billion; EPS estimate $4.09; Operating margin estimate %24.1
  • Full year projections: Free cash flow estimate $6.03 billion; Operating margin estimate 22.7%

With that in mind, and considering that options were pricing in a 7.7% swing after hours today (similar to the 7.6% swing expected ahead of the company's Q3 earnings results), here is what NFLX reported for its fourth quarter:

  • EPS $2.11, missing the estimate $2.19 and well above the 12c a year ago
    • EPS includes $239 million non-cash unrealized loss from F/X remeasurement on Euro denominated debt
  • Revenue $8.83 billion, +12% y/y, and beating the estimate if $8.71 billion
    • Revenue was $0.1B (2%) above the company's October forecast due to favorable F/X movement and stronger than anticipated membership growth.
  • Streaming paid net change +13.12 million, +71% y/y, and smashing the estimate of +8.91 million; this was the best ever Q4 in company history.
    • UCAN streaming paid net change +2.81 million vs. +910,000 y/y, beating estimates of +1.76 million
    • EMEA streaming paid net change +5.05 million, +58% y/y, beating estimates of  +3.66 million
    • LATAM streaming paid net change +2.35 million, +34% y/y, beating estimates of +1.36 million
    • APAC streaming paid net change +2.91 million, +62% y/y, beating estimates of +2.08 million
  • Operating margin 16.9% vs. 7% y/y, beating estimate 14.1%
  • Operating income $1.50 billion vs. $550 million y/y, beating estimates of $1.2 billion
  • Free cash flow $1.58 billion vs. $332 million y/y, beating estimates of $1.26 billion

For 2023, NFLX generated $7B of operating income, up 23% year over year. Operating margin for 2023 was 21%, ahead of its 18%-20% beginning-of-year forecast.  For the full year, Netflix generated net income of $5.41 billion for all of last year and closed 2023 with $7.1 billion in cash and short-term investments.

And here are the results visually:

Of the above results, what was most impressive is that the company whose content has been consistently spotty, somehow managed to sign up 13.1 million customers in Q4, making it the streaming giant’s best quarter of growth since viewers were stuck at home in the early days of the pandemic. The strong tally exceeded Wall Street’s estimate of 8.91 million and beat projections in every region of the world, with Netflix adding more than 5 million customers in Europe, the Middle East and Africa alone.

And here is the regional detail: for the second consecutive quarter, EMEA (Europe, the Middle East and Africa) accounted for the largest share of Netflix’s growth in the quarter. The company added over 5 million customers in that region, following the 4 million added last quarter. The average amount Netflix makes per customers has increased only modestly in the past year, rising 3%.

The impressive subscriber growth in the final quarter may not continue into 2024, however: Netflix said it won’t add as many customers in the first quarter of 2024 as it did in the final months of 2023, though the tally will exceed the year-ago period’s 1.75 million, to wit:

Similar to prior years, we expect paid net additions to be down sequentially (reflecting typical seasonality as well as some likely pull forward from our strong Q4’23 performance) but to be up versus Q1’23 paid net adds of 1.8M. We expect global ARM to be up year over year on a F/X neutral basis in Q1.

Wall Street expects Netflix to add 4.31 million customers in the quarter. That won’t hurt sales growth, however. Netflix said it will continue to boost revenue at a double-digit rate, in part by raising prices, as it has done for many years now. Indeed, the company forecasts Q1 2024 revenue growth of 13% to $9.24 billion, and includes a three percentage point headwind from F/X on a year over year basis, primarily due to the large decrease in the Argentine peso relative to the US dollar.

The company also expects to continue effectively monetizing the business:

Over the last few years we’ve increased sophistication on our pricing and plans strategy so that we can more effectively capture the value created by our service.

  • First, pricing. We seek to provide a range of prices and plans to meet a wide range of needs, including highly competitive starting prices. As we invest in and improve Netflix, we’ll occasionally ask our members to pay a little extra to reflect those improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service.
  • Second, ads. Scaling our ads business represents an opportunity to tap into significant new revenue and profit pools over the medium to longer term. In Q4‘23, like the quarter before, our ads membership increased by nearly 70% quarter over quarter, supported by improvements in our offering (e.g., downloads) and the phasing out of our Basic plan for new and rejoining members in our ads markets. The ads plan now accounts for 40% of all Netflix sign-ups in our ads markets and we’re looking to retire our Basic plan in some of our ads countries, starting with Canada and the UK in Q2 and taking it from there. On the advertiser side, we continue to improve the targeting and measurement we offer our customers.
  • Third, monetizing sharing. We believe we've successfully addressed account sharing, ensuring that when people enjoy Netflix they pay for the service too. Features like Transfer Profile and Extra Member were much requested, and many millions of our members are now taking advantage of them. At this stage, paid sharing is our normal course of business — creating a much bigger base from which we can grow and enabling us to more effectively penetrate the near term addressable market of ~500M connected TV households (excluding China and Russia), which should increase over time as broadband penetration rises

Netflix rebounded from a rocky 2022 by posting one of its strongest years of customer growth ever, buoyed by a crackdown on password sharing, the introduction of a cheaper advertising-supported option and a strong slate of programs. Hit shows of the latest quarter included the post-apocalyptic thriller Leave the World Behind and a documentary about soccer great David Beckham.

When Netflix lost customers in the first half of 2022, management responded by taking steps it had long resisted. The company introduced advertising, and forced customers to stop sharing passwords. The ad-supported tier got off to a slow start, but has begun to gather momentum. The company said earlier this month it now has more than 23 million people using the tier.

While Netflix still makes almost all of its money from people who pay to watch streaming video on-demand, that will change in the years ahead as the company has invested millions in video games and this week took another step in a new direction by striking a deal to stream live wrestling every week starting next year. Here is an excerpt from the company's 2024 perspective:

If we continue to execute well and drive continuous improvement — with a better slate, easier discovery and more fandom — while establishing ourselves in new areas like advertising and games, we believe we have a lot more room to grow. It’s a $600B+ opportunity revenue market across pay TV, film, games and branded advertising — and today Netflix accounts for only roughly 5% of that addressable market. And our share of TV viewing is still less than 10% in every country. But it all starts with the consumer. Because when we delight our members, we can drive more engagement, revenue and profit than the competition — creating an increasingly valuable entertainment company (for our members, content creators and shareholders) that will strengthen and grow over time.

Netflix’s strong performance stands in sharp contrast to many of its competitors in Hollywood, which operate shrinking cable networks and unprofitable streaming services.

Going back to the company's results, free cash flow for Q4 was $1.6B compared with $332 million in the prior year period. This was the third highest FCF quarter on record but was largely as a result of the lack of cash spending due to the recently concluded Hollywood strike. For the full year 2023, net cash provided by operating activities was $7.3B vs. $2.0B in 2022 while FCF totaled $6.9B compared to $1.6B in 2022. This included approximately $1B in delayed spending due to the WGA and SAG-AFTRA strikes. Over the past four years, Netflix has generated $12B in net cash provided by operating activities and over $10B in positive FCF.

The company noted that the strikes will cause some lumpiness in its year to year FCF progression. For the full year 2024, NFLX expects FCF of approximately $6B, and continues to expect 2024 cash spend on content of up to $17B. In Q4’23, the company repurchased 5.5M shares for $2.5B and it has $8.4B remaining under the current buyback authorization. The compaany has $400M in senior notes maturing in Q1 of this year and it plans to pay that down with cash on hand

In any case, while the company's Q1 guidance was a little nebulous, the market was more than happy with the surge in Q4 subs and the full year cash flow guidance, and sent the stock some 6% higher, roughly what the options market had priced in, and solidly above $500 per share, the highest level since exactly two years ago when NFLX price plunged from $700 to $200 in the span of 6 months.

 

Tyler Durden Tue, 01/23/2024 - 16:33

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

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March 12, 2024

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They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com. 

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

More Tech Stocks:

Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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Major typhoid fever surveillance study in sub-Saharan Africa indicates need for the introduction of typhoid conjugate vaccines in endemic countries

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high…

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March 12, 2024

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There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

Credit: IVI

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

 

The findings from this 4-year study, the Severe Typhoid in Africa (SETA) program, offers new typhoid fever burden estimates from six countries: Burkina Faso, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Madagascar, and Nigeria, with four countries recording more than 100 cases for every 100,000 person-years of observation, which is considered a high burden. The highest incidence of typhoid was found in DRC with 315 cases per 100,000 people while children between 2-14 years of age were shown to be at highest risk across all 25 study sites.

 

There are an estimated 12.5 to 16.3 million cases of typhoid every year with 140,000 deaths. However, with generic symptoms such as fever, fatigue, and abdominal pain, and the need for blood culture sampling to make a definitive diagnosis, it is difficult for governments to capture the true burden of typhoid in their countries.

 

“Our goal through SETA was to address these gaps in typhoid disease burden data,” said lead author Dr. Florian Marks, Deputy Director General of the International Vaccine Institute (IVI). “Our estimates indicate that introduction of TCV in endemic settings would go to lengths in protecting communities, especially school-aged children, against this potentially deadly—but preventable—disease.”

 

In addition to disease incidence, this study also showed that the emergence of antimicrobial resistance (AMR) in Salmonella Typhi, the bacteria that causes typhoid fever, has led to more reliance beyond the traditional first line of antibiotic treatment. If left untreated, severe cases of the disease can lead to intestinal perforation and even death. This suggests that prevention through vaccination may play a critical role in not only protecting against typhoid fever but reducing the spread of drug-resistant strains of the bacteria.

 

There are two TCVs prequalified by the World Health Organization (WHO) and available through Gavi, the Vaccine Alliance. In February 2024, IVI and SK bioscience announced that a third TCV, SKYTyphoid™, also achieved WHO PQ, paving the way for public procurement and increasing the global supply.

 

Alongside the SETA disease burden study, IVI has been working with colleagues in three African countries to show the real-world impact of TCV vaccination. These studies include a cluster-randomized trial in Agogo, Ghana and two effectiveness studies following mass vaccination in Kisantu, DRC and Imerintsiatosika, Madagascar.

 

Dr. Birkneh Tilahun Tadesse, Associate Director General at IVI and Head of the Real-World Evidence Department, explains, “Through these vaccine effectiveness studies, we aim to show the full public health value of TCV in settings that are directly impacted by a high burden of typhoid fever.” He adds, “Our final objective of course is to eliminate typhoid or to at least reduce the burden to low incidence levels, and that’s what we are attempting in Fiji with an island-wide vaccination campaign.”

 

As more countries in typhoid endemic countries, namely in sub-Saharan Africa and South Asia, consider TCV in national immunization programs, these data will help inform evidence-based policy decisions around typhoid prevention and control.

 

###

 

About the International Vaccine Institute (IVI)
The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO) and developed a new-generation typhoid conjugate vaccine that is recently pre-qualified by WHO.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, a Country Office in Austria, and Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit https://www.ivi.int.

 

CONTACT

Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 | aerie.em@ivi.int

Journal

The Lancet Global Health

Method of Research

Observational study

Subject of Research

People

Article Title

Incidence of typhoid fever in Burkina Faso, Democratic Republic of the Congo, Ethiopia, Ghana, Madagascar, and Nigeria (the Severe Typhoid in Africa programme): a population-based study

Article Publication Date

12-Mar-2024

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US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

Earlier today, CNBC’s…

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US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever... And Debt Explodes

Earlier today, CNBC's Brian Sullivan took a horse dose of Red Pills when, about six months after our readers, he learned that the US is issuing $1 trillion in debt every 100 days, which prompted him to rage tweet, (or rageX, not sure what the proper term is here) the following:

We’ve added 60% to national debt since 2018. Germany - a country with major economic woes - added ‘just’ 32%.   

Maybe it will never matter.   Maybe MMT is real.   Maybe we just cancel or inflate it out. Maybe career real estate borrowers or career politicians aren’t the answer.

I have no idea.  Only time will tell.   But it’s going to be fascinating to watch it play out.

He is right: it will be fascinating, and the latest budget deficit data simply confirmed that the day of reckoning will come very soon, certainly sooner than the two years that One River's Eric Peters predicted this weekend for the coming "US debt sustainability crisis."

According to the US Treasury, in February, the US collected $271 billion in various tax receipts, and spent $567 billion, more than double what it collected.

The two charts below show the divergence in US tax receipts which have flatlined (on a trailing 6M basis) since the covid pandemic in 2020 (with occasional stimmy-driven surges)...

... and spending which is about 50% higher compared to where it was in 2020.

The end result is that in February, the budget deficit rose to $296.3 billion, up 12.9% from a year prior, and the second highest February deficit on record.

And the punchline: on a cumulative basis, the budget deficit in fiscal 2024 which began on October 1, 2023 is now $828 billion, the second largest cumulative deficit through February on record, surpassed only by the peak covid year of 2021.

But wait there's more: because in a world where the US is spending more than twice what it is collecting, the endgame is clear: debt collapse, and while it won't be tomorrow, or the week after, it is coming... and it's also why the US is now selling $1 trillion in debt every 100 days just to keep operating (and absorbing all those millions of illegal immigrants who will keep voting democrat to preserve the socialist system of the US, so beloved by the Soros clan).

And it gets even worse, because we are now in the ponzi finance stage of the Minsky cycle, with total interest on the debt annualizing well above $1 trillion, and rising every day

... having already surpassed total US defense spending and soon to surpass total health spending and, finally all social security spending, the largest spending category of all, which means that US debt will now rise exponentially higher until the inevitable moment when the US dollar loses its reserve status and it all comes crashing down.

We conclude with another observation by CNBC's Brian Sullivan, who quotes an email by a DC strategist...

.. which lays out the proposed Biden budget as follows:

The budget deficit will growth another $16 TRILLION over next 10 years. Thats *with* the proposed massive tax hikes.

Without them the deficit will grow $19 trillion.

That's why you will hear the "deficit is being reduced by $3 trillion" over the decade.

No family budget or business could exist with this kind of math.

Of course, in the long run, neither can the US... and since neither party will ever cut the spending which everyone by now is so addicted to, the best anyone can do is start planning for the endgame.

Tyler Durden Tue, 03/12/2024 - 18:40

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